Insurance shortfall in Council financial blunder

October 9, 2012

By Christine Keighery

A financial gaffe by Newry and Mourne District Council was dealt a further blow last week with the revelation that the Council’s Insurance Company will not pay out the £40,000 to cover a payment made by the council to a business which was in liquidation.

Earlier this year Councillor Terry Hearty revealed the blunder which centred on the planned Council Recycling facility on the Newry Road in Crossmaglen. In 2009 the Council purchased the site and negotiations of the sale included an agreement that the seller would construct an entrance road. However, this never materialised and the company later went into administration.

The Examiner reported some months ago, that the Council handed over £44,000 to the seller without following proper protocol and was embroiled in a legal battle to have this money returned. Furthermore, the road still needed constructed at a projected cost of £65,000. Council officials also admitted that an important file documenting the terms of the sale had since disappeared.

At the time, Councillor Terry Hearty was incensed at this apparent waste of public money and the mishandling of the case by officials, and demanded an independent investigation into the circumstances of the errors. This independent investigation was launched early last month.

The Examiner understands that last month’s Finance Committee meeting revealed that the Council’s Insurance did not cover the error as it is a first party loss which is not insured under the Fidelity Guarantee Policy because no active fraud or dishonesty was committed.

In addition to the independent investigation, Council are expected to hold a meeting with the administrators and their legal advisors to consider the possibility of Council acquiring a piece of land at the site in Crossmaglen in lieu of the £40,000.